Proposed Medicare Payment Model Based on International Drug Prices Would Lower Patient Costs

November 14, 2018 by Donna Sweeney ONS Director of Government Affairs

On October 25, 2018, U.S. Department of Health and Human Services (HHS) Secretary Alex Azar announced an advanced notice of proposed rulemaking (ANPRM) calling for a demonstration project to more closely align Medicare payment for certain Medicare Part B drugs and biologics with international prices, which an HHS analysis showed to be 1.8 times lower on average ( than in the United States. The proposal is a follow-up to the president’s prescription drug blueprint and HHS request for information to reduce patient out-of-pocket costs for prescription drugs. HHS estimates a savings of $17.2 billion over five years.

Under the International Price Index (IPI) model, Medicare would pay private-sector vendors, based on an average international drug price “formula,” to take title of selected separately payable Part B drugs, provide them to physicians and hospitals, and manage the billing. Physicians (and potentially Nurse Practitioners) would still be responsible for collecting patient cost-sharing amounts from beneficiaries or supplemental insurers and would pay a fee to the vendors. The current average sales price add-on percentage that providers currently receive would transition to a flat fee payment.

The IPI model would be administered by the Center for Medicare and Medicaid Innovation and would operate for five years, beginning in spring 2020. The administration’s goal is to cover 50% of Part B drug expenditures for separately payable drugs.

CMS is seeking comments on the ANPRM by 5 pm on December 31, 2018 (, and is likely to introduce a proposed rule in spring 2019.

Trump Administration’s Viewpoint

In its press statement, the Trump Administration reiterated ( that reducing drug prices is a top priority and that this proposal would halt Americans from paying more for the same drug than foreign countries. By setting a payment formula based on international prices in 14 other countries and giving vendors price-negotiating power, the administration believes this model will significantly lower drug prices and patient out of pocket costs. The 14 comparative countries are Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, and the United Kingdom.

U.S. Congress’s Viewpoint

With a new Democrat majority in the House of Representatives, we have yet to see how this proposed Medicare Part B payment model and other administration drug reform proposals will fare. Some congressional Democrats, including Senator Ron Wyden (D-OR) and Representative Frank Pallone (D-NJ), issued statements of concern with the bill (, but Representative Nancy Pelosi (D-CA) publicly shared hopes for a “common ground” ( for Democrats to work on prescription drug reform with the president.   

House Energy and Commerce Committee Chair Greg Walden (R-OR) and House Ways and Means Committee Chair Kevin Brady (R-CA) issued a joint statement praising the president and HHS secretary ( for the efforts to lower drug prices and account for Americans paying more for drugs than other countries. 

Drug Industry’s Viewpoint

The Pharmaceutical Research and Manufacturers of America ( and Biotechnology Innovation Organization ( released statements that were deeply critical of the proposal for embracing foreign price controls rather than pro–market-based reforms and expressed concern that the proposal will harm medical innovation and patient access.

ONS Perspective and the Impact on Oncology Nurses

The IPI proposal could potentially impact oncology nurse practitioners who bill Medicare and administer Part B cancer drugs, such as chemotherapy infusions, if HHS extends eligibility beyond physicians to other providers. Although physicians and possibly nurse practitioners would no longer have to bill Medicare as they do currently, they would still be responsible for collecting patient copays and for selecting the outside vendors, who would compete based on negotiated pricing, customer service, and treatment options.  

ONS is closely monitoring the proposal. Interested individuals may respond to CMS's request for comments ( by 5 pm on December 31, 2018.

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